Advance tax is a type of payment used in the taxation system where individuals are required to pay an estimated portion of their total expected income tax due during the year throughout their earning period. Understanding advance tax and how to comply with it can help reduce potential penalties and interest charges related to underpayment or late payment of taxes.
What exactly is Advance Tax?
Advance tax is the payment of income tax on a pay-as-you-earn basis. It involves the estimation of total income from all sources for the year, the calculation of an estimated income tax liability, and its payment in installments as per due dates provided in the Income Tax Act and Rules.
The important provision of the Income Tax Act / Rules relating to the payment of Advance Tax are :
- No advance tax is payable if the total tax liability after reducing the tax deducted at the source is less than Rs. 10,000/-.
- If Tax is not paid in full for installments falling due on 15th June, 15th September and 15th December, interest at the rate of 1% on the short amount for 3 months is to be paid u/s 234 C.
- If Tax is not paid in full for installments falling due on 15th March, interest at the rate of 1% on the short amount for 1 month is to be paid. If you delay payment of the last installment in March by even a day, you will have to pay interest on the entire installment amount.
- If you do not pay tax at all or if the aggregate paid by March 31 is less than 90 percent of the total tax payable, you will have to pay an interest of 1 percent per month on the deficit amount from April 1 of the following year till the date you file your return u/s 234 B.
- If tax is paid after the due date for filing of the return, an interest of 1 percent per month is payable on the deficit amount from the due date of filing of return till the date of payment of deficit u/s 234a
| Due date | Advance tax installment amount. |
| 15th June | At least 15% of Tax on total income for the year. |
| 15th September | At least 45% of Tax on total income for the year less advance tax already paid |
| 15th December | At least 75% of Tax on total income for the year less advance tax already paid. |
| 15th March | 100% of Tax on total income for the year less advance tax already paid. |
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